Category Archives: Currencies
Your One And Only Warning Concerning Bitcoins
Sipping on the edge of the liquid pooled in this glass, my eyes slip out of focus. And as the 9th floor fades from view, an unclear image is left. It is a premonition – perhaps call it instinct – of what is going to happen if bitcoins continue to gain popularity.
I should say that I see only one way this prevision does not come to pass; if the bitcoin was created by the US government, for some probably lunatic reason, like social experimentation, or beta testing taking the dollar virtual.
Shy of that, those of you buying these little wayward programs are pretty screwed.
I will remind you:
March 18, 2011
STATESVILLE, NC—Bernard von NotHaus, 67, was convicted today by a federal jury of making, possessing, and selling his own coins, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Following an eight-day trial and less than two hours of deliberation, von NotHaus, the founder and monetary architect of a currency known as the Liberty Dollar, was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States.
This is what is waiting for you at the end of that tunnel. Whoever the central players are in this game, when the FBI finally becomes aware of it, you are lamb fodder.
Von NotHaus, who remains free on bond, faces a sentence of up to 15 years’ imprisonment on count two of the indictment and a fine of not more than $250,000. Von NotHaus faces a prison sentence of five years and fines of $250,000 on both counts one and three. In addition, the United States is seeking the forfeiture of approximately 16,000 pounds of Liberty Dollar coins and precious metals, currently valued at nearly $7 million. The forfeiture trial, which began today before United States District Court Judge Richard Voorhees, will resume on April 4, 2011 in the federal courthouse in Statesville. Judge Voorhees has not yet set a date for the sentencing of von NotHaus.
Do you think the US government is going to play fair with you? That they’ll just sit by and watch as you play games with their status as the global reserve currency, all because you started doing the same thing with some MP3 files back in the 90′s?
Think again, friend.
“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict
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I will provide some background here for those of you who aren’t familiar with me. I am not a government advocate, nor do I particularly like that the US political system has control of something as important as the measurement stick of over half of all financial transactions occurring on planet Earth.
I especially dislike that this position allows clowns-in-suits like US Congressmen, government agency employees, State officials, municipalities, banks, people in unique positions of influence, friends of the aforementioned, random con artists,….a half dozen others…to engage in the wildest stupidities at the fringe of their imaginations without immediate and dire consequences.
And I don’t exactly respect the government for its ability to pass, implement, and enforce laws. In fact, I generally get a kick out of most non-violent, non-harmful crime. Example: a guy who owns a fully automatic weapon and regularly posts videos of himself shooting it online.
Hilarious. No one gets hurt. It’s in mock contempt of a half dozen laws. And there’s nothing the government can do about it. Tracking him down would be prohibitively expensive, especially considering that he isn’t actually doing anything.
Another example: buzz sawing cattails. Know what cattails are? Weeds, mostly. But they are apparently sacred weeds, as cutting them down gets the DNR and EPA driving 3 year prison sentencing down your throat if they catch you. Amazingly, that never really stops anyone.
But just because the US government is totally inept at catching most forms of “crime” (and equally bad at conveying what constitutes legitimate need for criminal statuses in the first place…), that shouldn’t trick you into thinking you can get away with anything.
In fact, the US government is an enormous trillion dollar organization, and that’s quite a bit of firepower to have coming your way if you happen to be doing one of the things the government absolutely-will-not-tolerate you doing.
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Now that I’ve explained that, let me point out why bitcoin is such a serious threat to the US government.
First, the US government is completely reliant on its status as the global reserve currency to fund its deficit. Any assault to that status is an immediate game changer as it is, as it would force the US to spend within tax receipts, or else suffer real, actual consequences.
We get away with printing because it all ends up over seas, in accounts, or traded for bonds.
Second, because of the peer to peer method, if left unattended, tax receipts along with most trade reporting would drop off the map. Not from corporations. The US can steel fist corporations into staying above ground because their assets are holed up in the financial system and the half dozen major banks left in operation. But definitely bitcoin has serious risks to the ability of the US to collect taxes and track spending. Think Canada black market on crack. People show what they’re doing just enough to qualify for healthcare, then back under the surface.
Thus, after losing the ability to print money or borrow indefinitely, the governments ability to collect from their citizens would also be hindered.
And finally, because it undermines the ability of government to track behavior.
Think about how much time is spent by groups like the Fed maintaining huge data collections about what people are up to. They don’t do that for sport. They do that because it lets government plan ahead about how to position themselves. Does the country need more agriculture? More oil? Are people hoarding gold, electronics, food staples, clothing? Is there trouble brewing?
These measures don’t just provide wealth to people sitting somewhere in an agency. They also give a heads up to stewing problems. They provide a knowledge base to gain an edge. The feds have spent the last decade tightening down the financial system for a reason – we’re now at the point where we can track rogue money orders and stamp out terrorist cells trying to collect. That’s not easy, and it’s not possible without a centralized financial system.
Bitcoin hits each of these three sore points, so I can guarantee you if it keeps gaining in popularity, then the FBI will crack down, and do so ruthlessly hard.
So how?
Well, I could see three basic steps being taken to crush this if it keeps getting out of control. They are extreme, and sound fanciful, and most of you will say “no way”. And that’s why I’m worried about them.
1) no more free and open internet. You think the Federal government cares about maintaining a free and open internet? They don’t care. They maintain it that way right now because it doesn’t exactly hinder them and because it’s a politically sensitive subject. In fact, the free and open internet structure we have has proven wonderful adept at striking down our enemies. Because generally speaking, the US political system is still way better than any of the alternatives. Because our leaders just steal a bunch, and lie. They don’t kill a few thousand people when they get caught doing it. And you’re still mostly free to go about your lives.
Plenty of you mistake the government adherence to an open internet platform as meaning they can’t pull it off. And they probably can’t, not totally. Public employees aren’t that good. But much of their reluctance to try has more to do with the tradeoff gain/loss dilemma than them actually not being able to police the internet.
Let’s say some guy steals a hundred dollars worth of media on the internet. Great. So you bust him and fine him and throw him in jail, or just generally set about getting him fired. Now tell me, how much has the government lost in tax receipts from him? How much did they lose setting up the agency in the first place?
But bitcoin takes it all a step further and challenges the ability of the US government to even exist. You hit that level, and the internet will be put on lockdown. With lots of babysitters looking for “sharing”. And maybe not everyone gets caught. But plenty do.
2) Bitcoins declared illegal, with steep punishments for trading them. Now, bitcoin is nothing but a managed exchange system. The programs you’re moving around have no intrinsic value. Few people trade them. It’s all about the accounting mechanisms, the way the purses talk to the system to make sure fake coins aren’t entering circulation, and the fact that (allegedly) someone out there can’t produce a lot more of them.
What are these things worth if you can’t move them? If the government cracked down on silver or gold, I could bunker them for a while, and still know they’ll be there when I get back. Maybe the value will have changed, or the risks, but it’s not like suddenly my ounces will change measurement. What’s a computer program generated by a complicated algorithm worth if the entire underpinning promise – free peer to peer trading – is taken offline for a few weeks or months?
Again, the US has no chance of rounding them all up. But there are things they can do, like…
3) task force created to find and destroy all bitcoin users. There’s allegedly $1 billion worth of bitcoins out there right now. What would I do if I was charged with crushing this thing?
Well, I would take a few billion dollars (a pittance of the US budget), and I would seed it into a few thousand accounts. And then I would get a few thousand agents together, and go out and start trading these things for whatever you lot are buying with them. And I would track you. And I would use the Patriot Act to do it no questions asked. Because as our good friend US Attorney Tompkins said, “you are the scum of the Earth, and have conveniently ceded your rights as a US citizen.” And once I mapped out pretty well who the major players are, I would pick perhaps the top 25th percentile of you – the millionaires – and I would utterly destroy every fabric of your lives, very publicly.
And bitcoin would probably not survive the event.
This is more or less what the founder of bitcoin was afraid of, and eluded to, before he fled and covered his tracks with his anonymity. It’s a shame it is going to play out like this. He seems like a brilliant chap, and I appreciate that. And I wish we lived in a world where these very capitalist, very libertarian ideals of free trade, honesty, and liberty to live out your life without being conscripted to death-by-a-thousand-causes was possible.
But we don’t live in that world. We live in this one; where this clever little open source project threatens the bread and butter of a group of people that you couldn’t pay me to drop my guard around. So the founder and intellectual father of bitcoin escaped. But if you’re going fully dedicated to this thing (and not just laundering money out of the EU), then I can say I see only dark and painful, life ending-equivalence lurking for you on the horizon.
Selloff Will Prolong A Week Or Two, Then We Go Higher
So far, taking a check at the state of affairs, I still think we can turn back around. Look at the sheer price run and know that we are only now approaching what could be called “top of the range”. I cannot become concerned by bond prices, as they remain at all-time lows and, thanks to central banks, are not allowed to sell off significantly anyway. Why shouldn’t bonds go up? (I know, that logic cannot hold, but for the moment it’s a sticky sort of rule of thumb). Bonds selling off hard are a cause for concern. Bonds being bought are a given.
But I am most assuredly fixed on the yields of France, Italy, Spain and Greece. Yesterday, Italy managed to eradicate three months of goodwill for themselves and their neighbors in what amounts to sheer idiocy. Italians obviously don’t understand the concept of a Catch 22 – in this case, they can pick between austerity or being left for dead (a compelling choice, I know).
Italian 10 years are now approaching the 5% level; effectively lifting ~1% in a matter of two days. While that is certainly a warning sign, I wish to see if that price can hold.
Also, remember that France is intricately tied up in all of this. If we were getting ready for a true panic, I would expect France yields to be getting murdered here.
I’m also not sure what I think of the EURUSD. It’s sitting at around 1.3, which has really been a sort of center for the currency swap during the last 2-3 years. Any time there’s trouble or rebound, it seems like we make the decision around 1.3.
If we were ready to crater, part of me thinks we’d be seeing a bigger initial euro rally, as European financials stock up on emergency stores of euros. Yet, we certainly have had a large resurgence of the EURUSD off the lows, and perhaps that was driven by European financials as much as anything, gathering that very same I have just described.
Also, even though I suspect demand for currency would create a spike before any major selloff, ultimately the euro is destined to go lower, either through devaluation necessary to hold the EU together, or its abstract worthlessness when the EU begins to come apart.
In any major event I expect the euro to move sharply and with conviction. The sashaying it’s undergoing at the moment makes me think this selloff will pass with time.
Until I’m more confident of that though, I’ll be keeping a wary eye on bonds and currencies.
What A Lovely Monday Slaughter
I apologize for not piping in on the sell off. I was driving down from northern Michigan and only had the intense joy of watching “Revenge of Silvio Berlusconi” on Twitter, as opposed to the full blown Blue Ray.
My cash position only stands just north of 10%. Not even a few days ago it was almost 30%. Thus I have egg all over my face.
But I have hope. Hope for higher prices. This winter was so excellent, it’s difficult for me to believe I could possibly walk away down from the amount I’ve made. So I have some breathing room. Also, I have EUO as a hedge; and that is just running here.
Thus I will be watching closely what happens.
Long(er) Silver – Bought AGQ
Okay, I had to step in to the silver market today, taking a leveraged ETF play with AGQ.
I’ve owned silver, more or less continuously, since 2009 – in the physical form.
But every now and again I also leverage up the play with moves in the financial products. Now is just one such time.
Silver is a component of my 9th floor. I’ve used it in the limestone stucca that adorns my walls. I used it in the mortar to build the very foundation of the room itself. It’s a staple, because it is so undervalued, I can off the back of my hand say “silver is undervalued” at any time of the day, and probably be right.
I got into AGQ for $41.77. This is just for a trade.
The Fed is printing another trillion dollars, and the debt crises of the world are nowhere near the halfway mark yet.
Mull that over, why don’t you…
EURUSD Shall Send EU Into Cardiac Arrest
At almost 1.36, purchasers of EURUSD have completely lost grip with reality. Between US monetary policy and Japanese central bank response, carry trades have been caught in a torrential storm. If you were on the wrong side of those moves, your screams were lost to the cheers of equity bulls. However, the move is overextended, largely built on your back.
The problem is that there really is no economy, globally, that can afford to be the leaning post for the rest of the world. The assumption of global macro economics was always that the likelihood of all economies being in the same desperate condition at the same time was negligible. Unfortunately, as the economies became co-dependent, the assumptions of i.i.d. that made those statistical declarations possible withered away.
None of the economists noticed.
So now, here we are, and monetary policy can only be used to grab a quick upper hand. Ultimately, the brunt of utilizing the printing press ends right back on your country’s inhabitants. There’s no “superiorly positioned” exporter that can afford to give up a few points of growth.
So, as you watch the EURUSD climb, remember that each step of the move is unhinging the stability of the largest social wellfare state on the planet. With Germany, the keystone of Europe, flirting with recession, and Spanish and Italian debt barely under control (largely thanks to a renewed Japanese/US carry trade), the wellbeing of EU states is imperative.
But as I said, all countries have become interdependent. The same monetary response that has lowered Spanish/Italian bonds is also making EU exports uncompetitive. Any previously witnessed ECB policy response to this problem simultaneously makes debt yields increase. The only way to avoid the complimentary variance here is for the ECB to purchase EU debt directly.
Throughout the entire debate, this activity has been staunchly opposed by Germany, Finland and Austria. Will those countries cave? Or will they finally succumb to their ethnic roots, and become completely disaffected with EU authority?
Regardless, the euro disaster has not finished rolling yet.
Shorting Euro – Bought EUO For $18.25
I opened a position in EUO for $18.25. This is a starter position, which I will add to every few weeks/months.
Remember, every time thus far that European authorities have put claim on “the end of the crisis being just in sight”, it has come back to haunt them.
They are playing a confidence game. The realities of the situation are different. Just below the surface, trouble is brewing.
Remember that.
